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Friday, April 19, 2024

The rise of Buy Now Pay Later in Thailand Banks need to Listen

Mr. Pham Quang Minh, General Manager at Mambu ThailandIt’s now up to Thai banks. Fintechs were the first to champion BNPL, particularly through mobile apps or collaborations with online platforms to provide this type of embedded finance (the seamless integration of financial services adopted by non-financial companies).

The secret formula behind BNPL.

BNPL is a type of short-term financing that allows customers to buy products and pay for them in the future at zero or low interest. The future is composable.

Banks and retailers seeking to introduce BNPL offerings should choose partners which give them a head-start by leveraging their flexible technology solutions and domain expertise. While a handful of Thai banks are exploring BNPL solutions, the rest may lose out if they do not act fast: according to research, BNPL fintechs have already diverted US$ 8-10 billion of annual revenue away from banks globally. From travel to consumer electronics or fashion, various online retailers constantly identify key profitability drivers while keeping offerings and payment options appealing and convenient for their customers.

COVID, the e-commerce boom, and economic pressure, on the other hand, have transformed BNPL into a growth engine for e-commerce businesses and lenders, including banks.

Thailand is one of the most exciting and fastest-growing retail markets in Southeast Asia, having been an early adopter of new trends driven by digital-first consumers, contributing to rapid e-commerce growth in recent years.

With the massive potential for continued growth, Thai banks must approach BNPL strategically and decide whether and how they will play a role in this new business line.

Financing at Point of Sale, a “Buy Now Pay Later (BNPL) service, ” has grown in popularity as a win-win proposition for retailers and customers. It is especially beneficial to young consumers who are digitally savvy and with limited financial resources (entry-level jobbers or students) or those who do not have a bank account or do not qualify for credit or loans. The mobile commerce market, led by mobile applications, is expected to grow at a compound annual growth rate of 12% to $25 billion by 2023.

Repayment terms vary depending on the BNPL provider but typically include payment in full by the end of the month, pay-in-3 (three equal monthly payments) or pay-in-4 (four equal biweekly payments). This new financing option has been thriving in Thailand, and prospects show that it is here to stay: the country’s BNPL Gross Merchandise Value is expected to reach US$ 15,818.1 million by 2028 (up from US$ 893.1 million in 2021).

Mambu enables its customers to build an end2end BNPL solution in a few weeks using Mambu’s core product engines in combination with a composable framework for integrating best-for-purpose third-party providers.

BNPL will allow banks to improve their merchant relationships and value proposition, allowing them to capture a greater share of wallets through cross-selling and customer acquisition. Making it part of their offering will be critical, as BNPL is rapidly eclipsing traditional consumer finance models, such as bank credit or personal loans, and even, in some cases, debit cards. Mambu provides its customers with the technology to quickly and easily access financial products.

Those who included this financing option in their business strategy saw higher sales conversions and larger basket sizes. For example, after introducing Klarna, one of the leading BNPL-focused fintechs, to its store, the UK fashion retailer Hype saw a 38% increase in online conversions. It helps increase revenue and allows consumers to access goods they would not be able to afford otherwise.

This financing option is fast, convenient, flexible, and democratic. This does not have to be the case, as 70% of BNPL users would be willing to use BNPL offerings from their banks if they were available. Now financial institutions must decide whether to join the BNPL herd with their offerings or risk being left behind.

BNPL has numerous advantages for retailers and merchants.

Written by: Supaporn  Pholrach (Joom)

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